NetFlix Responds to Bandwith Controversy

I wondered if Netflix was ever going to grace us regular consumers with a response to the whole debacle of bandwith usage and it seems that time is now. Netflix in Canada has come under attack by large telecom companies that control satellite / cable and of course our internet.

Within days of Netflix being announced to come to Canada we suddenly saw new rules passed by the CRTC to allow the telecom companies to charge us whatever they want per gig. What this means is that every movie you watch as part of your $7.99 plan on Netflix costs you upwards of $6 – $12 depending on who’s math you use in fees from your internet provider. Nice isnt it?

Well many of you very educated readers have written in outlining just how little bandwith actually costs and the fact that it costs pennies per GIG and yet we are being charge 1500% plus in markup to pay $1.50 or more for the same thing. VP of Communications for Netflix Steve Swasey politely pointed out what readers have been saying in a TorontoLife article saying quote;

Canada ISPs do a good job [ referring to speed ] but we’re concerned about download caps. Netflix favors the unlimited-up-to-a-large-cap model. The marginal cost to deliver a marginal gigabyte over a wired network is less than a penny but Canadians would be paying much more than that.

Clearly he could have said it a bit better and not said marginal quite so many times but basically he is saying what our tech savvy readers have been saying since the CRTC announced this new telecom friendly rule. It costs pennies, why are users being dinged big dollars just because they want to use a competitive service?

Netlix CEO Reed Hastings also responded to complaints by the telecom companies that their infrastructure is being used to deliver this service, which in my words clearly competes with their cable / satellite service. CNET quotes him saying;

“We think the cost sharing between Internet video suppliers and ISPs should be that we have to haul the bits to the various regional front-doors that the ISPs operate, and that they then carry the bits the last mile to the consumer who has requested them, with each side paying its own costs.”

Honestly my view here is that the Canadian Telecom companies are likely scared to death of Netflix stealing a ton of their users and in a knee jerk reaction rather then finding a creative way to stop Netflix the end consumers are being penalized and punished. The silly part is we all end up on the side of Netflix whether we use them or not and angry with the Telecom companies that are punishing us. The new rule which has been put up for review thanks to Stephen Harper limits us not just from Netflix but any high demand bandwith service like game downloads on STEAM or XboxLive.

I dont know where this is going but as far as I am concerned a free market is a free market.. or is it? For some reason I feel like I just got thrown into the stone age and I keep asking myself why we do not allow the American Telecom companies to come compete in Canada so we can get access to their services and dare I say it some competition that favors the consumer.